"Wrigley" is easily reminiscent of the world's largest chewing gum producer, the United States Wrigley Company, which is famous for producing chewing gum such as "Green Arrow", "Yida" and "Jinlang". But China also has a company called "Wrigley", which mainly produces toilets, tiles, cabinets, etc., which is what many people see as "fake foreign goods" Wrigley home.
Under the boom of listing in the home furnishing industry, Wrigley Home furnishing has also recently submitted a prospectus to the Shenzhen Stock Exchange and is ready to go public.
Red Star Capital Bureau found from the Wrigley Home Prospectus that the company has a number of problems that need to be solved urgently, and even has "hard injuries" to accompany, and its IPO road may be difficult to smooth.
The family business wants to go public
Revenue fell three times in a row, but net profit increased significantly
As a large domestic sanitary ware enterprise, Wrigley Home, although its name is quite like a "foreign brand", is actually a native Chinese enterprise. It was established in Foshan, Guangdong in 1994 to produce toilets, and later the scope of business gradually expanded, involving tiles, shower rooms, hardware plumbing, cabinets, home customization and other categories.
Wrigley Home's customized bathroom products, according to the official website
According to the prospectus, the controlling shareholder of Wrigley Home is Lehua Hengye Investment, holding 55.24% of the pre-issuance ratio; xie Yuerong, the founder of the company, directly holds 23.94% of the shares; Huo Chen Trading holds 9.21% of the shares. Xie Yuerong, Huo Qiujie, Xie Anqi and Xie Wei collectively hold 65% of the equity of Lehua Hengye Investment. Xie Yuerong and Huo Qiujie are husband and wife, Xie Anqi and Xie Wei are the children of the two, and the four of them collectively control 79.17% of the shares of the issuer. In addition, some of the shares are held by their relatives.
At the management level of the company, Xie Yuerong served as the chairman and general manager of the company, Huo Qiujie served as the director and deputy general manager of the company, Xie Anqi served as the director of the company, and Xie Wei served as the director and deputy general manager of the company.
Obviously, Wrigley Home is a typical family business.
The Xie Yuerong family controls the Wrigley home
Xie Yuerong is a big man in the bathroom industry, as early as 1995 led a professional team to develop a one-piece toilet, in order to make the market quickly accept, he positioned the product price range at 700-800 yuan, far lower than the international brand. Wrigley's one-piece toilet became a hit, quickly opened the market with high cost performance, and set off a "one-piece toilet revolution" that swept the country.
The main brands of Wrigley Home include: ARROW Wrigley, FAENZA Faenza, ANNWA. Red Star Capital Bureau reviewed the prospectus and found that these well-known bathroom brands originally belonged to the same brand, and they had different market positioning to meet the needs of different consumer groups. However, it is also common for these three major brands in the terminal market to compete with each other and "brothers and sisters".
Wrigley Home occupies a leading position in the domestic market share. According to the data of the consulting agency Euromonitor International, in the Chinese bathroom market, the market shares of Kohler, TOTO, Wrigley, Huida and Hengjie in 2018 were 20.4%, 11.5%, 7.3%, 4.4% and 3.6% respectively. More than 10% of the market share is foreign-funded enterprises, and Wrigley ranks first among domestic brands, but there is still a certain gap compared with foreign brands.
According to the prospectus, from 2018 to 2020, the operating income of Wrigley Home was 6.81 billion yuan, 6.658 billion yuan and 6.502 billion yuan, respectively; the net profit attributable to the mother was 197 million yuan, 556 million yuan and 589 million yuan, respectively. It is not difficult to see from this that although the company's annual revenue scale is very high, it has entered a downward channel for three consecutive years, and fatigue is fully displayed; and the net profit fluctuates greatly, and even runs counter to the change in revenue.
The main financial data of Wrigley Home
Wrigley Attributed the decline in revenue and profit fluctuations to the superposition of factors such as product sales structure and changes in consumer preferences, intensified market competition, and the impact of the new crown epidemic. The company said that if it fails to take effective countermeasures, it will face the risk of a continued decline in operating income.
Current assets cannot cover current liabilities
The prospectus discloses that by the end of 2020, there are a total of 1746 Wrigley home dealers, 6197 distributors, and 10239 terminal store outlets. In the past three years, the total revenue of distribution channels to Wrigley Home furnishing accounted for 94.77%, 95.98% and 94.39% respectively, which shows that it is highly dependent on dealers.
Compared with other comparable companies in the same industry, in order to reduce the dependence on dealer channels, most of them adopt an omni-channel model. Such as Dongpeng Holdings (003012. SZ) dealerships control around 60%; Mona Lisa (002918. SZ) also requires that the proportion of dealers be reduced to 60% in recent years, and the tooling channel should be increased to 40%.
The prospectus discloses that from 2018 to 2020, the asset-liability ratio of Wrigley Home was 82.95%, 76.05% and 67.56% respectively, which was much higher than that of comparable companies in the same industry. Red Star Capital Bureau compares Dongpeng Holdings and Seagull Sumitomo (002084. SZ), Mona Lisa and other listed companies reported that the asset-liability ratio in the past three years was controlled within 50%. In this regard, Wrigley Home furnishing explained that the asset-liability ratio is higher than that of comparable companies in the same industry, mainly because of the small accumulation of early operations, and the company has not yet been listed, and the financing channels are relatively limited.
Looking at the company's current liabilities, from 2018 to 2020, the current liabilities of Wrigley Home were 5.083 billion yuan, 4.63 billion yuan and 4.41 billion yuan, and the total current assets were 2.948 billion yuan, 2.722 billion yuan and 3.043 billion yuan. Although the current liabilities continue to decrease, the company's current assets in the past three years have not been able to cover the current liabilities, which shows that the short-term debt repayment pressure is relatively large, and there is a slight wind and grass, which inevitably makes people worry about the capital chain problem.
The company's current assets cannot cover current liabilities
Regarding financial questions such as the difficulty of current assets to cover current liabilities, Red Star Capital Bureau sent a letter to the board of directors of Wrigley Home, but as of press time has not received a reply.
Is it reasonable to see a $4.2 billion increase in valuation in a year?
According to the prospectus, in October 2019, when Wrigley Home increased its capital, Lehua Jiayue subscribed and contributed 13.5122 million yuan, CSI Investment subscribed to contribute 4.6956 million yuan, and Jinshi Kunxiang subscribed to contribute 3.5217 million yuan. Lehua Jiayue is the company's employee shareholding platform, and its capital increase price is 1.90 yuan / registered capital; China Securities Investment and Jinshi Kunxiang as external investors, the capital increase price is based on the post-investment valuation of 7 billion yuan, and the two parties have negotiated to determine 8.52 yuan / registered capital.
It is worth mentioning that China Securities Investment and Jinshi Kunxiang are both sponsors of the company, enterprises under the same control of CITIC Securities. A year after its participation in the capital increase, the valuation of Wrigley Home soared, resulting in a significant profit for the companies controlled by the two sponsors, which also raised the question of whether "profit transmission" was involved.
In October 2020, Wrigley Home increased its capital again, with the participation of Zhuhai Aoheng, Shenzhen Venture Capital and Red Clay Junsheng. Behind Zhuhai Ao Heng is the famous investment institution Hillhouse Group, which subscribed for 25.679 million new shares of the company for 337.5 million yuan, Shenzhen Venture Capital subscribed for 6.6577 million shares for 87.5 million yuan, and Laterite Junsheng subscribed for 1.902 million shares for 25 million yuan. The capital increase price is based on the post-investment valuation of 11.25 billion yuan, and is determined to be 13.14 yuan per share after consultation between the two parties.
Two months later, in December 2020, Wrigley Home increased its capital again, and Red Star Xizhao, Qingdao Qingkun, and Beijing actually participated. Red Star Happy Omens and Qingdao Qingkun Red Star Macalline (601828. SH) under the umbrella of Beijing Actually Family (000785. SZ) is an important partner in the home furnishing industry chain. Among them, Red Star Xizhao subscribed for 4.1168 million shares of the company for 54.1066 million yuan, Qingdao Qingkun subscribed for 228,300 shares for 3 million yuan, and Beijing actually subscribed for 8.69 million shares for 114 million yuan. The price of the capital increase is still 13.14 yuan per share.
From the perspective of the time node of capital increase, in just one year, the valuation of external investors in the equity is 7 billion yuan and 11.25 billion yuan, respectively, in the case of revenue and net profit in the same period, its valuation has soared by 4.25 billion yuan, which also caused the market to question: Is its valuation reasonable in the short term? The partners in the industrial chain, Red Star Macalline, actually home to usher in the IPO after half a year, is there a suspicion of surprise investment?
Some insiders also told Red Star Capital Bureau that it is more common for large chain stores to participate in some strong home furnishing brands, because the two sides have close cooperation, which is conducive to obtaining greater support from each other after entering the shares. At the same time, from the valuation and stock price of Wrigley Home, it is difficult for external investors in the later period to say that they have taken advantage.
A number of production bases were shut down, and nearly 3,000 employees were laid off in two years
At present, the domestic sanitary ware market is still a traditional industry, but also a typical "large industry, small enterprises", the market concentration is not high, the product homogenization is serious, the fierce competition is called the "Red Sea", and the growth of Wrigley Home is also full of uncertainty. In this regard, Wrigley Home publicly expressed its desire to enter the overseas market and proposed to "be a world enterprise", and also established an overseas business department in 2019, announcing that it would enter nearly 60 countries and regions overseas.
However, the prospectus shows that the company's overseas market revenue in the past three years is pitifully small, only 290,000 yuan, 2.28 million yuan and 7.75 million yuan, accounting for less than 0.2%. The company admits that at present, it is mainly focused on the domestic market, the scale of overseas revenue is small, and the company will consider appropriately increasing the development of overseas markets in the future while maintaining the growth of domestic market share.
Wrigley Home's asset impairment losses from 2018 to 2020 were 20.35 million yuan, 180 million yuan and 64.72 million yuan, respectively, especially the asset impairment in 2019 was too large, which also caused market concern, is it an abnormal impairment? Red Star Capital Bureau found that the large-scale asset impairment is also related to the company's continuous shutdown of three production bases: one is to shut down the bathroom cabinet production line of The Dezhou base in Shandong, the second is that Shunde Le gradually stops production from the base, and the third is the temporary shutdown of the solid wood bathroom cabinet production line of the Shaoguan base. The shutdown of these production bases requires the corresponding asset impairment provision.
With the closure of some of the company's production bases, coupled with the active implementation of the intelligent manufacturing strategy, the demand for production line workers has been reduced. During the reporting period, the total number of employees at Wrigley Home dropped from about 18,000 in 2018 to 15,000 in 2020, with a total of nearly 3,000 layoffs in two years. As a labor-intensive industry, the company's employees with bachelor's degree or above account for only 8.2%, while employees below junior college account for 81.82%, and it is impossible to know where these grass-roots employees will go after layoffs.
In addition, the company also had a bad debt recovery of nearly 40 million yuan in 2018, which also raised questions about whether the bad debt provision was too arbitrary. The first year is still a bad debt and the second year has become a profit, which is also inevitably criticized.
In short, although Wrigley Home is a leading enterprise in the bathroom industry, the prospectus also exposes a number of problems, and even no lack of "hard injuries" exist, in the current case of only pre-disclosure, its IPO road or face a certain test.
Red Star News reporter Li Weiming
Responsible editor Ren Zhijiang Editor Deng Lingyao
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